Billionaire vaccine maker Adar Adar Poonawalla, CEO of the Serum Institute of India, is picking up a 50% stake in Dharma Productions and Dharmatic Entertainment, for Rs 1000 crore, valuing Karan Johar’s film and television production and distribution flagship at Rs 2000 crore, further underpinning the ongoing flurry of consolidation in the entertainment industry.

ET broke the story online on Monday morning, ahead of a formal announcement.

Poonawalla’s is making this investment in his private capacity through Serene Productions. Dharma will retain the residual stake with Johar continuing to remain as the creative spearhead of the company, as Executive Chairman. Apoorva Mehta remains the Chief Executive Officer.

Dharma is owned 90.7% by Karan Johar and 9.24% by his mother, Hiroo.

“I do foresee consolidation in this industry. Internationally, we've seen a lot of consolidation due to new content creation methods and distribution channels,” Poonawalla told ET. “With the evolving landscape of content production and distribution, I see significant potential for such partnerships both internationally and nationally.”

The key factor that led to stitching together this alliance is Johar retaining creative control while partnering with a deep pocket family he is familiar with. The Poonawalla investment will help the production house with enough financial muscle to navigate the fast-changing demands of digitally savvy consumers who are often digital natives. The investment will also boost Dharma’s efforts to double down on content for new platforms and formats while continuing to deliver interesting stories for a global audience.

“This partnership will help us create more verticals within the organization and allow us to take creative chances. This gives us the bandwidth to expand Dharmatic Entertainment and create much more in the digital domain,” added Johar. “It also allows us to capture a lot of value in the value chain which comes with owning IP and catalogue – we have already been doing that and hope to double down on it with this capital.”

Film production is a volatile business with earnings linked to box office successes of films. Major Hindi film production houses, including Dharma, have been cautious in greenlighting new projects due to the unpredictable nature of the box office, which also impacts the value of streaming and satellite rights, ET had reported on October 14.

Johar said, the company’s attempts will be to increase the value and create more content. “We aim to produce a higher volume of films with this partnership compared to what we're currently doing. With shrinking audiences and an overreliance on streaming rights, Johar feels a strategic business shift is already underway. “Mid-budget films are the backbone of the film industry's economics, and we need to explore this segment further, alongside our tentpole productions, to create a more diverse and sustainable portfolio of films,” he said.

The industry is experiencing major upheavals due to shifting consumer preferences, influenced by exposure to global content and the increasing dominance of on-demand consumption in urban areas. Additionally, the economic model is strained, with star salaries often consuming up to 70% of a film’s budget. Consolidation on the demand side, with the emergence of large broadcasters, streaming platforms, and multiplexes, is also putting pressure on content companies like Dharma. Satellite rights, once a steady revenue stream, have plummeted to historic lows, and the value of streaming deals, which was funding movie costs in many cases, is being corrected, further straining the economics of the film business.

In the theatrical space, multiplexes now dictate a film’s success, contributing an estimated 60–70% of Hindi films' box office revenue, while single-screen theaters continue to struggle. Post-COVID, many viewers prefer to wait 8–10 weeks to watch films on OTT platforms, leading to reduced footfall in cinemas.

Some industry players are already contemplating profit share model or box office linked payouts to offset rising star costs. “It's essential not to overload our above-the-line costs. While we respect actors' talent and craft and want to pay what's fair, all artists must understand the current challenges in the entertainment industry. There's enough potential in big films for everyone to gain,” said Johar.

Dharma has been actively seeking investments for a while and had engaged in talks with several large conglomerates and industrialists like Sanjiv Goenka’s Saregama, a company they already have business ties to become part of a cash-rich conglomerate. Some discussions with Reliance Industries and Jio Cinema also did take place.

Raine Group was the advisor to the deal.

Dharma Productions posted a nearly fourfold surge in revenue to Rs 1,040 crore in FY23, from Rs 276 crore the previous year. Net profit, however, fell 59% to Rs 11 crore due to a 4.5-times rise in expenses at Rs 1,028 crore, according to the company's latest available financial data accessed from Tofler. In FY23, the company earned Rs 656 crore from distribution rights, Rs 140 crore from digital, Rs 83 crore from satellite rights, and Rs 75 crore from music. This compares with earnings of with earnings of Rs 19 crore, Rs 167 crore, Rs 34 crore, and Rs 21 crore from these streams, respectively, in FY22.

Founded by Johar’s father Yash Johar in 1976, with its first venture starring Amitabh Bachchan in a film called Dostana, Dharma has been led by Johar and his team since his father passed away. Johar directed his first movie at 25, ‘Kuch Kuch Hota Hai’, and has gone on to produce close to 50 Bollywood including hits like 'Kabhi Khushi Kabhie Gham, Yeh Jawaani Hai Deewani, 2 States, Kapoor & Sons and Dear Zindagi’. Seen as a launch pad for several young actors, many from well-known film families like Allia Bhatt, Varun Dhawan, Janhvi Kapoor, Ishaan Khatter and Ananya Pandey among others. In 2018, the company launched Dharmatic Entertainment to diversify and create original content for global streaming platforms and has worked with global OTT platforms like Netflix and Amazon Prime to create and produce shows like “The Fabulous Lives of Bollywood Wives”, “Call Me Bae”. From blockbuster films Johar was also among the first of his peers to migrate to multi-media himself, becoming a chat show host for the popular Koffee with Karan show.

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Serum Institute of India CEO Adar Poonawalla-led Serene Productions on Monday said it will pick up a 50 per cent stake in Karan Johar’s Dharma Productions and Dharmatic Entertainment for Rs 1,000 crore.

The past few months had witnessed speculation in the entertainment industry that Karan Johar was planning to sell a stake of Dharma Productions. Saregama and Reliance were said to be frontrunners.

With this deal, Poonawalla—the CEO of Serum Institute of India (SII), and Chairman of Poonawalla Fincorp—is foraying into entertainment through his Serene Productions.

The deal, which sees Karan retaining his position as the Executive Chairman and Apoorva Mehta as the CEO, is being viewed as a win-win for both parties. In terms of numbers prima facie, this deal values Dharma— which includes its digital arm, Dharmatic Entertainment—at Rs 2,000 crore. Sources say it is an optimistic valuation.

An insider says, “Karan has got a good valuation. Technically, Dharma’s revenue fell by 50 per cent in the last financial year. In 2022-2023, its revenue was said to be at Rs 1,000 crore. Brahmāstra: Part One—Shiva [2022] was a major contributor to the profit. However, in 2023-24, even though the company witnessed a spike in its digital and music earnings, its total revenue had a 50 per cent drop as it did not have a blockbuster. But Adar has invested in the company, looking at its equity and Karan’s creative might. A part of the Rs 1,000-crore investment will be directed to the original investors—Karan and his mother Hiroo Johar—while the remaining will be allocated towards production.” 

For Poonawalla, who has long been friends with Karan, it is a strategic investment as it gives him a significant stake in the media industry. Another source breaks it down, “For Adar Poonawalla, it’s a great diversification after dominating the pharmaceutical and financial sectors. This move will bring corporate culture into the corridors of Dharma. All the heavy lifting that Karan and Apoorva had been doing, in terms of cost management, will now be delegated.”

As is the norm with such deals, the company is expected to undergo restructuring. “Some of Adar’s people will take key positions at Dharma, and there will be a lot of lay-offs,” says  another source. 

It is understood that the roles will be clearly divided in the 50-50 partnership. Decades after his filmmaker-father Yash Johar founded Dharma in 1976, Karan took the company to new heights with his vision. He not only helmed many blockbusters—from Kuch Kuch Hota Hai (1998) to Student Of The Year (2012)—but also backed many directors, becoming something of Bollywood’s big daddy.

“Now, Karan will spearhead the company’s creative operations and lead it from the front. Adar wants to stay away from the creative aspect. So, everything related to films will be handled by Karan, including the star fees and the budget on which a film is to be mounted. Adar will look at the operational aspects, probably telling him how much money can be spent on the workforce, how much bonus to be given, and so on.” 

The equal partnership that Poonawalla’s deal afforded was one of the reasons why Karan inked the deal. In contrast, Saregama, owned by Sanjeev Goenka, and Reliance Industries were reportedly in the bidding war to buy a majority stake in Dharma.

A source reveals, “Saregama was willing to acquire the stake for Rs. 800 crore. Adar outbid both the players. But another crucial reason is that neither of those giants would have gone into a 50-50 partnership. It has been seen historically that Reliance eventually acquires the companies it buys stakes in.” The partnership is being viewed as a huge boost for the Hindi film industry, which has been struggling since theatres reopened after the pandemic-induced shutdown.  

- Adar Poonawalla is the CEO of Serum Institute of India, the world’s largest vaccine-producing company in terms of volume, which produced Covishield in India. He is also the Chairman of Poonawalla Fincorp. 

- The Rs 1,000-crore investment in Dharma Productions marks the pharma tycoon’s foray into the entertainment industry with Serene Productions. 

- In the 50-50 partnership, Karan Johar will retain his Executive Chairman position and spearhead the creative operations. Apoorva Mehta will continue as the CEO.

- Part of the investment will be directed to the original investors—Karan and his mother Hiroo Johar—while the remaining will be allocated towards production.

- Saregama and Reliance Industries were said to be in the bidding war to buy a majority stake in Dharma.